After-tax rupee is more popularly known as income after taxes and it denotes the total usable or disposable revenue that an individual or corporation can spend. Computation of after-tax income for businesses is almost like the computation of after-tax income for individuals. However, one key difference is that instead of obtaining the value of gross income, companies start their computation by defining total revenues. Thus, to proceed with the understanding of after-tax income, one must be aware of the taxation system of India.
It is known that taxes are a major form of revenue for any government. This money is collected by the government for use in various schemes, aimed at the welfare and development of the country and state. In India, the tax system is a well-defined, three-layered structure. The tax arrangement comprises of the central government, state governments, along with local municipal organizations. However, in terms of taxes, then there are two kinds of taxes in India. The first one is Direct tax and the second one is called Indirect tax. Income tax, gift tax, capital gain tax, etc form a part of the direct taxes while VAT, service tax, GST, customs duty, etc. are a part of the indirect taxes. The Central Government of India levies taxes of customs duty, income tax, central excise duty and service tax. Agricultural income, professional tax, land revenue, state excise duty and stamp duty form a part of the taxes levied by state government. The local bodies collect octroi, property tax, water tax, municipal tax etc.
Direct taxes are obligatory for corporate entities and individuals and are non-transferable. For individual taxpayers, Income tax is the most vital type of direct tax which must be paid to the government. This income tax is imposed through each assessment year (1st April to 31st March). As per the Income Tax Act, 1961, it is obligatory for an indivdual to pay income tax as per the slab defined by the government. The current tax slab is as follows;
|Income Tax slab
|Up to Rs. 2,50,000
|From Rs. 2,50,001 to Rs. 5,00,000
|From Rs. 5,00,001 to Rs. 10,00,000
|Above Rs. 10,00,000
The above tax structure requires individuals to declare income, and can claim tax deductions through various sections. These sections offer tax savings options through healthcare, insurance, national pension scheme investment etc.
However, there also exists another option for individual tax payers where the taxpayers do not want to claim any tax exemptions through various sections of the Income Tax Act.
|Income Tax slab
|Rs.0 – Rs.2,50,000
|Rs.2,50,001 – Rs. 5,00,000
|Rs.5,00,001 – Rs. 7,50,000
|Rs.12500 + 10% of total income which exceeds Rs.5,00,000
|Rs.7,50,001 – Rs. 10,00,000
|Rs.37500 + 15% of total income which exceeds Rs.7,50,000
|Rs.10,00,001 – Rs.12,50,000
|Rs.75000 + 20% of total income which exceeds Rs.10,00,000
|Rs.12,50,001 – Rs.15,00,000
|Rs.125000 + 25% of total income which exceeds Rs.12,50,000
|Above Rs. 15,00,000
|Rs.187500 + 30% of total income which exceeds Rs.15,00,000
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